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Waste Management (WM)
Q4 2010 Earnings Call
February 17, 2011 10:00 am ET
David Steiner - Chief Executive Officer, President and Director
Jim Alderson - Director of Investor Relations
Robert Simpson - Chief Financial Officer and Senior Vice President
Hamzah Mazari - Crédit Suisse AG
Scott Levine - JP Morgan Chase & Co
Michael Hoffman - Wunderlich Securities Inc.
Vance Edelson - Morgan Stanley
Albert Kaschalk - Wedbush Securities Inc.
Jonathan Ellis - BofA Merrill Lynch
Previous Statements by WM
» Waste Management CEO Discusses Q3 2010 Results – Earnings Call Transcript
» Waste Management, Inc. Q2 2010 Earnings Call Transcript
» Waste Management, Inc. Q4 2009 Earnings Call Transcript
Thank you, Nicole. Good morning, everyone, and thank you for joining us for our fourth quarter 2010 earnings conference call. With me this morning are David Steiner, Chief Executive Officer; and Bob Simpson, Senior Vice President and Chief Financial Officer.
David will start things off with a summary of the financial results for the quarter and a review of the details of our revenue growth, including price and volume trends. Bob will cover operating costs and the financial statement. We will conclude with questions and answers. During their statements, any comparisons made by David and Bob, unless otherwise stated, will be with the fourth quarter of 2009.
Before we get started, let me remind you that in addition to our press release that was issued this morning, we have filed a Form 8-K that includes the press release as an attachment and is available on our website at wm.com. The Form 8-K, the press release and the schedules to the release include important information that you should refer to. During the call, David and Bob will discuss our results on an as-adjusted basis including SG&A costs, earnings per fully diluted share which they may refer to as EPS, operating expenses, effective tax rate and income from operations margin.
These financial measures have been adjusted for items management believes do not reflect our fundamental business performance and are not indicative of our result of operations. All of these measures, in addition to free cash flow, are non-GAAP measures. Please refer to the reconciliations to the most comparable GAAP measures in the schedules to the earnings press release, which can be found attached to the Form 8-K filed today and on the company's website at wm.com.
Additionally, during the call, you will hear certain forward-looking statements based on current expectations, opinions or belief about future periods. Those statements are subject to risks and uncertainties that could cause actual results to differ materially. Some of these risks and uncertainties are detailed in our earnings press release this morning and in our filings with the Securities and Exchange Commission, including our most recent Form 10-K.
This call is being recorded and will be available 24 hours a day, beginning approximately 1:00 p.m. Eastern Time today until 5:00 p.m. Eastern Time on March 3. To hear a replay of the call over the Internet, access the Waste Management website at wm.com. To hear a telephonic replay of the call, dial (800) 642-1687 and enter reservation code 33194439.
Time-sensitive information provided during today's call, which is occurring on February 17, 2011, may no longer be accurate at the time of a replay. Any redistribution, retransmission or rebroadcast of this call in any form without the expressed written consent of Waste Management is prohibited.
Now I will turn the call over to Waste Management's CEO, David Steiner.
Thanks, Jim, and good morning from Houston. We had a very good fourth quarter, earning $0.60 per share, an increase of over 15% compared to the $0.52 we earned in the prior-year quarter. Our Collection, Landfill and Recycling businesses all performed very solidly. We increased operating earnings and improved operating margins in each of these lines of business. Revenue increased by $181 million or 6% from the prior-year period. This is the fourth consecutive quarter of year-over-year revenue growth.
Our revenue improvement was driven by better Recycling commodity prices, acquisitions and year-over-year increases in revenue growth from yield. On the pricing front, the fourth quarter was our strongest quarter of the year. Internal revenue growth from yield on our collection and disposal operations was 2.6% in the fourth quarter. We remain committed to our pricing discipline and in the fourth quarter, we again overcame the pricing headwind we faced on the roughly 40% of our collection revenue that has price adjustments based on a CPI index.
CPI adjustment had caused a drag to our revenue growth from yield of approximately 40 basis points in the quarter and about 70 basis points for the year. So for both the quarter and the full year, we outpaced our long-term pricing objective to achieve price increases in the range of 50 to 100 basis points above CPI on our entire Collection and Disposal business.
The combined internal revenue growth from yield in the industrial, commercial and residential lines of our Collection business was 3.1% in the fourth quarter. Internal revenue growth from yield was 3.5% in both our commercial and industrial lines. While internal revenue growth from yield on our residential line of business was 2.2%.
Commercial new business pricing increased for the sixth consecutive quarter. Service increases, net of service decreases, were slightly negative for the quarter but improved significantly compared with the prior-year quarter. The winter quarters are typically the weakest of the year for service increases, net of decreases.